Twitter Quarterly Earnings Exceed Estimates, Company to Lay Off 9 Percent of Workforce
CEO Jack Dorsey remains mum on recent takeover speculation.
A week after Twitter's attempts to sell slipped away, the social media company on Thursday reported better-than-expected third-quarter financials — and layoffs.
Twitter CEO Jack Dorsey during a morning analyst call remained tight-lipped when it came to addressing recent takeover speculation. He offered no comment beyond saying that the company remained "committed to maximizing shareholder value."
Besides deciding to cut 9 percent of its workforce, or around 350 people, to ensure a leaner operation, Dorsey and fellow Twitter execs touted how recently launched live-video-streaming apps, including for live NFL games and U.S. presidential debates, were helping grow revenue for other advertising formats.
Twitter CFO Anthony Noto reported that the second and third presidential debates averaged 3.3 million unique viewers, up 30 percent over the first debate. And the most recent three live NFL games reached around 3 million viewers, up 28 percent from the first NFL game and its audience of 2.35 million viewers.
"The strategy is coming together very nicely, the metrics are very positive, it's a great product for our advertisers, and we're at the beginning of the beginning, with a lot more to flow out during the rest of the year," Noto told analysts about the live-video-app strategy.
The bullish talk Thursday morning from Twitter execs follows the company last month looking like it could have a new owner in time for its latest earnings results. After more than a year of slowing user growth, the company's stock had flagged, making it a prime acquisition target.
At one time, SalesForce, Microsoft, Google and Disney were said to be exploring an acquisition. But many potential bidders backed away from a deal due to concerns over Twitter's high valuation, slowing growth and rampant harassment on the site.
That left investors looking for Dorsey — the co-founder who was reinstalled to run the company a little more than a year ago — to outline a comprehensive plan for how he will grow the business independently. Dorsey, who also serves as CEO to payments company Square, has already made some changes to the platform, doing away with some anachronistic features that were confusing to new users and placing an emphasis on live video, including the streaming of football games and the presidential debates.
Dorsey's current strategy, outlined Thursday to analysts after potential buyers fled, includes additional measures to drive advertising revenue and user growth, and eventual profitability.
"Our core product initiatives are working, with accelerating growth in daily active usage, tweet impressions and time spent," he said. Dorsey added Twitter was being "disciplined" in how it invested in its business, as the company was "driving towards GAAP profitability in 2017."
Twitter on Thursday reported adjusted third-quarter earnings of $92 million, 13 cents per share, on revenue of $616 million. During the same period last year, Twitter had brought in revenue of $569 million and earnings of 10 cents per share. For the latest quarter, Wall Street was expecting $606 million in quarterly revenue and adjusted earnings of 9 cents per share.
The company once again reported a loss of $103 million, or 15 cents per share, on the basis of generally accepted accounting principles (GAAP), which publicly traded companies use for their earnings reports. Management said Thursday that the company plans to turn positive on a GAAP basis next year.
Twitter's user base, meanwhile, reached 317 million people, up 3 percent over the year-ago period and up from 313 million in the second quarter. Average daily active usage grew 7 percent over the year-ago period.
Last quarter, Twitter's monthly active users grew by 3 million to 313 million. While the company's audience does continue to grow, the slow rate at which it is growing has concerned investors who have watched as Instagram has overtaken it with 500 million monthly active users.
"Our strategy is directly driving growth in audience and engagement, with an acceleration in year-over-year growth for daily active usage, Tweet impressions and time spent for the second consecutive quarter," said Dorsey in an earlier statement that accompanied the financial results. "We see a significant opportunity to increase growth as we continue to improve the core service."
He added: "We have a clear plan, and we're making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter's future."
"We're getting more disciplined about how we invest in the business, and we set a company goal of driving toward GAAP profitability in 2017," said Twitter CFO Noto in his own statement. "We intend to fully invest in our highest priorities and are de-prioritizing certain initiatives and simplifying how we operate in other areas. Over time, we will look to invest in additional areas, as justified by expected returns and business results."
And he said: "Our live strategy is showing great progress. We've received very positive feedback from partners, advertisers and people using the service, and we're pleased with the strong audience and engagement results."
Twitter estimates that it will incur approximately $10 million-$20 million of cash expenditures for severance as a result of the layoffs and $5 million-$10 million of non-cash expenditures, consisting primarily of stock-based compensation expense. Most of the pretax workforce restructuring charges will be taken in the fourth quarter.
Twitter shares closed Wednesday about even at $17.29. On Thursday, they were up 3.1 percent at $17.83 in early trading.
Georg Szalai and Etan Vlessing contributed to this report.